8/21/04, INDIA (Oilmandi) - CLASSIFICATION disputes are seemingly endemicto edible oils, more so with regard to palm oil.

Crude palm oil (CPO) currently attracts a basic Customs duty of 65 percent, while the duty is 75 per cent on both RBD (refined, bleached,de-odourised) palm oil and RBD palmolein.

However, the 65 per cent duty on CPO is subject to it confirming to thedefinition of "crude palm oil and its fractions, of edible grade", as perthe Revenue Department's notification dated August 1, 2003.

This, in turn, requires the oil to have "an acid value of two per cent, ormore and total carotenoid (as beta carotene) in the range of 500-2,500 mgper kg, in loose or bulk form".

If a CPO consignment fails to meet the minimum carotenoid specification of500 mg per kg, then it does not qualify as crude oil under heading15.11.10.10 of the Customs Tariff and, therefore, would not be assessableto 65 per cent duty.

One would presume, then, that the particular oil would attract 75 per centduty as is applicable for RBD palm oil (15.11.90.10) or RBD palmolein(15.11.90.20).

But in a new twist, the Customs authorities in Chennai have reportedlybegun charging a duty of 85 per cent on imported CPO, which does not meetthe minimum carotenoid specification.

The 85 per cent duty is apparently being levied on the basis ofinterpretation of a notification dated March 1, 2002.

The notification contained a table in which goods described against serialnumber 29 as "edible oils falling under headings 15.08, 15.11, 15.12,15.13, 15.14 or 15.15" were charged to a general 85 per cent duty (15.11deals with palm oil and its fractions).

At the same time, the table also specified a 65 per cent duty on "crudepalm oil and its fractions, of edible grade, in loose or bulk form",listed under heading 15.11 against serial number 34.

What the Chennai Customs authorities have basically done is to superimposethe August 1, 2003 notification (prescribing the minimum carotenoidstandards for an oil to be called `crude palm oil') on the original March1, 2002 notification (levying 85 per cent duty on all oils mentionedagainst serial number 29).

By this logic, CPO consignments not confirming to the minimum carotenoidstandards would be automatically assessable at 85 per cent, as they do notsubscribe to the definition of "crude palm oil and fractions, of ediblegrade".

The move has taken importers by surprise. As it is, over 80 per cent ofthe CPO entering the country's ports do not meet the minimum carotenoidstipulation, which means they are either way chargeable to 75 per centduty.

"But now, we are being levied 85 per cent. The authorities have asked usto furnish bank guarantees for 25 per cent of the duty difference amountand execute a bond for the remaining 75 per cent," said a Chennai-basedimporter.

The importers have also challenged the Chennai Customs authoritiesinterpretation for levying the 85 per cent duty.

According to them, the March 1, 2002 notification provides for a 75 percent duty to be levied on "all goods" falling under the heading 15.11.90,which is shown against serial number 434 of the table.

Heading 15.11.90, in turn, comprises three sub-headings - 15.11.90.10 (RBDpalm oil), 15.11.90.20 (RBD palmolein) and 15.11.90.90 (other).

The importers claim that CPO not confirming to the minimum carotenoidspecifications should be classified under sub-head 15.11.90.90 and, byvirtue of this, attract the 75 per cent duty as is applicable on RBD palmoil and RBD palmolein.

With the Chennai Customs refusing to yield ground, the dispute has nowbeen referred to the Central Board of Excise and Customs (CBEC) forclarification.

The need for acid value norms

THE purpose behind prescribing a minimum acid value of two per cent andtotal carotenoid range of 500-2,500 mg per kg for crude palm oil (CPO) wasto ensure that the oil being imported by domestic refiners at 65 per centduty was genuinely `crude'.

Refining mainly involves lowering the free fatty acid (FFA) content in thecrude oil to 0.25 per cent or below, followed by bleaching andde-odourisation.

The crude oil is normally orange red in colour, which is due to thepresence of carotenoids. The carotenoids are destroyed during bleachingand distillation in the refining process.

The refined, bleached and de-odourised (RBD) oil then undergoes furtherfractionation (separating the liquid `olein' from the solid `stearin'fraction) and it is the resulting `olein' that gets marketed as RBDpalmolein.

Vanaspati makers, on the other hand, do not fractionate the RBD palm oil.They, instead, hydrogenate it to yield a solid product that mimics ghee.